According to CMS https://cms.gov Administrator Seema Verma, “Rural Americans face many obstacles as a result of our fragmented healthcare system. This includes living in communities with disproportionally higher poverty rates, more chronic conditions, and more uninsured or underinsured individuals. As a result, Medicare payment changes are needed to bring stability to rural hospitals.”
The inpatient hospital wage index specifies how inpatient payment rates are adjusted to account for local differences in wages that hospitals face in their respective labor markets. It is intended to measure differences in hospital wage rates across geographic regions and is updated annually based on wage data reported by hospitals. Hospitals located in areas with wages less than the national average receive a lower Medicare payment rate than hospitals located in areas with wages higher than the national average.
For example, a hospital in a rural community could receive a Medicare payment of about $4000 in treating a beneficiary admitted for pneumonia while a hospital in a high wage area like many urban communities could receive a Medicare payment of nearly $6000 for the same case, due to differences in their wage index.
The current wage index system has created a downward spiral that has increased the disparity in payments between high wage index hospitals and low wage index hospitals, and as a result, payments going to rural hospitals and other low wage index hospitals have declined.
To address this disparity in payments, CMS is proposing to increase the wage index of low wage index hospitals to ensure that people in rural areas have access to high quality, affordable healthcare. CMS is considering several ways to implement this change and would like to receive comments on the different approaches.